Vol. 339 No. 10
I move:
(1) That Part XX of the income Tax Act, 1967 (No. 6 of 1967), shall not apply or have effect in relation to any distribution or payment of interest referred to in that Part that is made on or after the 9th day of February, 1983.
(2) It is hereby declared that it is expedient in the public interest that this Resolution shall have statutory effect under the provisions of the Provisional Collection of Taxes Act, 1927 (No. 7 of 1927).
I might remind the House that I must put this Resolution no later than 10.40 p.m.
Can the Taoiseach give us an explanation of this Resolution?
What is involved here is relief involving a reduction of 20 per cent of the tax liability of individuals solely resident in the State in respect of distributions or payments of interest made on stocks, shares or securities held by them which come within the provisions, originally, of an Act of 1932 designed to give preference to holdings in Irish companies. Since that time many things have happened. Of course, the level of taxation in manufacturing companies today is 10 per cent, very much lower than it was in the past. This relief is being discontinued at this point, the original purposes of which are not relevant in the way they were at the time it was introduced, at the time of the establishment of Irish industry.
It implements one of the recommendations of the Report of the Commission on Taxation, recommendation No. 31, which said that the 20 per cent relief for individual investors in certain industrial companies should be ended on the grounds that the relief had served the purpose for which it was introduced and was now unnecessary. The Commission added that today the demand for investment opportunities in publicly-quoted Irish companies exceeded what the market supplied. Indeed that is one of our problems, that there is an inadequate range of Irish companies in which one can currently invest and the funds available for investment exceed that demand. There is no problem today in attracting people to invest in Irish industry and publicly-quoted companies. There are just not enough publicly-quoted companies for people to invest in. Therefore the situation in 1932, when it was necessary to attract people to invest in Irish companies no longer arises. The Commission on Taxation recommend therefore that this provision be ended and we are carrying out their recommendation.
I suspect it is the abolition of relief that was there.
Yes.
This may be a question the Taoiseach cannot answer but I am sure it is something in which the Taoiseach and the Government should be interested, that is, how the information in relation to this resolution was known some two or three days ago and enabled certain companies to beat the impact of this resolution. Has the Taoiseach any observation to offer on that?
There must have been a leak.
I wonder is the Deputy correct in that. There have been suggestions of people trying to beat the budget in another area and getting it wrong if I recall correctly from my reading of the paper, but I have not seen an allegation in relation to this aspect. I am open to correction if the Deputy has information not available to me.
Will the Taoiseach tell us which resolution?
I have a recollection that I saw something in the papers about people seeking to anticipate budget reaction in another area. They were wrong because the action they feared was not taken in the budget. I am not aware of any such allegations being made in respect of this.
The Taoiseach does not accept that anyone has taken advantage of the relief which was in existence? Is the Taoiseach categorically stating that?
The only item I know of, or have been advised that there was any allegation about relates to civil servants thinking that something might happen to their gratuities. That has not happened.
It is a wonder.
The other item relates to advance corporation tax and people seeking to anticipate action there. That is not covered by any of the resolutions here. They are the only two items I have seen reference to as regards people trying to anticipate what would be contained in the budget.
The Taoiseach was not aware of any allegation in respect of this resolution?
No.
This does not involve any relief in relation to the payment of dividends?
It affects the tax on dividends received from Irish companies.
Relief is being abolished?
Yes.
Is the Taoiseach saying he did not read about certain companies doing this over the last two or three days?
My understanding and advice is that the allegation relates to people seeking to anticipate advance corporation tax and it is not related to this matter.
I have asked the question if this resolution affects the dividend payment to shareholders of Irish companies.
It affects the tax paid on dividends.
There was relief until today. Tomorrow such relief will not be available. Is that right or wrong?
That is correct.
The Taoiseach is telling the House that he is not aware of any companies using the relief that is available in the last two or three days. It was widely publicised in the papers and referred to as a leak from some source in Government.
It was in the daily newspapers.
I am open to correction. Deputies may have read something which I did not. I am advised that the suggestion related to ACT and not to this provision here. I cannot clarify it any further as I have no information along the lines of the Deputy's suggestion.
Was it advance corporation tax and not dividend payments?
That is what I understand.
The publicity I understand was about dividend payments made by Irish companies in the last two or three days to beat the abolition of this relief.
We are at cross purposes. To understand the proposal in Resolution No. 10 one would have to go back to the original relief referred to. The point Deputy MacSharry is putting forward is not covered in this resolution. It is only fair to say that if people were taking advantage of ACT they must have had some information about it. This resolution is not the one which has been abused but it is a serious matter if people seem to have taken advantage of this in the sure and certain knowledge that some adjustment would be made in the budget. That raises serious implications. The points put forward by Deputy MacSharry are legitimate even though they do not relate to this resolution. The Taoiseach should have an investigation carried out in the Department of Finance in this area. Somebody must have had knowledge of what was going to happen and advantage was taken of it.
If it does not arise on this resolution it is not relevant to the discussion. Perhaps it could be raised wherever it is relevant.
There is a serious implication in what the Deputy says. Obviously it requires investigation but it could also be fortuitous. There were many people doing things in anticipation of the budget. There were people seeking to resign and take gratuities from the public service.
None of them actually did so.
A large number of people anticipated the total abolition of mortgage relief and were rushing mortgage and house purchase contracts. It might be no more than that but because of the serious implications it should be investigated.
I accept what the Minister says. It should be investigated.
I accept that.
The point put forward is very serious.
Can the Taoiseach confirm that nobody retired from the public service before his or her time was up prior to the introduction of the budget?
I am sorry——
The Taoiseach said it a moment ago.
I made that remark semi-humorously. There were rumours circulating about civil service gratuities and some civil servants said this might affect their decision to stay on. I am not aware of anyone actually resigning but I cannot prove that nobody resigned.
Does the Taoiseach accept that he said it?
I said it.
The Taoiseach means that it was not significant.
I am putting the question.
I am not finished asking questions. Is this the abolition of the 20 per cent relief on dividends which was introduced in 1932?
Yes.
Would the Taoiseach agree that in present circumstances where we are trying to give some incentive to industry and where a company was floated in Ireland recently to invest in American industry that this is the appropriate time to remove that remission?
The Commission on Taxation recommended that it should be removed because circumstances today are different from those in 1932. At that time there was no confidence in Irish industry and an incentive was needed to get people to invest in publicly quoted companies. The situation has now been reversed and demand for such shares seems to exceed supply because the number of publicly quoted companies has not expanded commensurately with the increased flow of funds in the country. To provide an incentive for investment in Irish industry when there is more money seeking to invest in industry than can do so is rather a waste of taxpayers' money.
Does the Taoiseach not accept that the reason there is more money around to invest in Irish industry is because we joined the EMS and have exchange control?
The number of publicly quoted Irish companies is relatively small and the total number of shares available is small vis-à-vis the number of people seeking such shares. It goes back over a number of years and has nothing to do with the EMS. The EMS may have intensified that situation but it goes back long before that and it has been a problem in this country that the number of publicly quoted companies is so small and that so many companies are still private companies. What we really need is an incentive for private companies to go public rather than an incentive for people to invest in publicly quoted companies where the demand for shares exceeds the available supply. There is no justification for retaining this and the Commission on Taxation were quite clear on that point.
It would be my case that the amount of money lost to the Exchequer would be very small.
It is £0.5 million in a full year.
The other reliefs have superseded the benefit of this.
We have better things than this to do with £0.5 million.
It is needed for Avoca miners.
